Tesla Motors reported first quarter earnings after the bell on Wednesday.

Overall the company netted a 12 cents per share profit. The street had expected earning of 7 cents per share in the first quarter (ex-items) on lower Model S deliveries.

On a GAAP basis the company lost 40 cents per share in 2014, or $49.8 million.

Last year, Tesla also report a 12 cents gain in Q1 (ex-items).

On the revenue side, analysts were looking for a number around $704.5 million (non GAAP), in reality $713 million was realized as compared to $561.8 million in Q1 of 2013.

On a GAAP basis $621 million in revenue was booked. As part of Tesla’s revenue stream $15 million came from Toyota powertrain sales and almost $12 million from regulatory credit sales; of that, no zero emission vehicle (ZEV) credit sales were logged. ( Q1 of 2013 included $68 million worth of “green” credit revenue)

First quarter GAAP automotive gross margin came in at 25.4% (25.3% on a GAAP basis). Included in this margin calculation was an “unplanned” $2 million reserve for underbody shield retrofits.

Tesla Model S Production Eclipsed 7,500 Units In Q1

Tesla slightly bested their own estimates for both production and deliveries in the quarter. Tesla also noted that they saw “net orders grew sequentially by more than 10% in the quarter” in the United States.

7,535 Model S sedans produced (vs estimate of 7,400)

6,457 Model S sedan delivered (vs estimate of 6,400)

Also for the first time Tesla put some firm guidance on year-end expectations for sales. Gone is the 40,000 “production level” expectation; in its place, Tesla looks to deliver “more than 35,000 deliveries in 2014.”

Specific to this quarter (Q2), Tesla estimates it will deliver about 7,500 Model S vehicles, with total production between 8,500 and 9,000 units.

“Planned production is again higher than deliveries because of the growing pipeline of intransit cars to Asia and Europe that have been built-toorder for customers. This includes cars destined for right hand drive markets. The quarterly gap between production and deliveries is expected to decline in future quarters.”

Looking at the numbers, it is hard to ignore the fact that Tesla needs to sell over 21,000 cars in the 2nd half of 2014 in order to hit their 35,000 delivery estimate. However, the company is noting that production (and therefore sales) of the Model S has been constrained by battery cell supply; and that problem will continue in the second quarter, but “should” improve in Q3.

Model X

Tesla Model X – Rollout Beings “Spring of 2015″

Tesla notes they will also be working on expanding their assembly process for the upcoming Model X. However, where once the company expected to push out a few copies of the X by year’s end to fulfil original expectations, Tesla notes that the introduction will now take place next year.

“Extensive development work on Model X is underway and we expect to have production design prototypes ready in Q4.”

“Model X efforts are on track to ramp up production in the spring of 2015. We have just completed the final studio release of the vehicle. The tooling process has started with several suppliers …”

Model S Demand/Expansion

As always the company was hesitant to put a specific number on the ongoing demand/buy rate for the Model S, but they did offer the following:

Tesla notes it took “more than a year to secure proper government approvals, licenses and facilities,” and that as part of that effort, the Model S will be entitled to “free” license plates in at least one region as the Shanghai government has clear the EV for special exemption.

Tesla notes that without this exemption plates can go for as high as “$10,000 to $15,000 per plate” at public auction.

“We plan to expand in China as fast as possible because we believe the country could be one of our largest markets within a few years.

We are also encouraged by how fast we have been able to develop our infrastructure in China when the propersupport is in place. With the help of the Shanghai government, for example, we were able to construct a Supercharger station within just a few weeks of site selection. At the start of China deliveries we had three Supercharging sites open, each powered by clean electricity from solar panels. Our plans are to install a large Supercharger network in China.”

United States Expansion:

aggressive growth for stores and service centers

total Tesla retail locations to grow 75% in 2014 over 2013

Supercharging Network: Tesla plans to open 200 new Supercharging station globally for the balance of this year. Bringing the year-end total number of stations to 300 locations.

Model S Global Rollout Update

“As we grow globally, we are also expanding our vehicle portfolio. Our addressable market will increase with the launch of the right hand drive Model S in the United Kingdom next month, and in Japan and Hong Kong later this summer. “

Two Gigafactory Sites Will Be Developed In Parallel To Avoid Unforeseen Delays

Gigafactory Update

Tesla confirmed that the Gigafactory project is on course to begin battery cell and pack production in 2017, but still have not as of yet finalized the location for the plant. Last month Tesla stated that they would start work on two separate locations for the Gigafactory and further explained their rationale today:

“…we are going to start work on at least two locations in parallel in order to minimize risk of delays arising after groundbreaking. Planning discussions with Panasonic and other potential production and supply chain partners continue to go well and we are pleased with the high interest level in the project.

By the time the Gigafactory reaches full, annualized production in 2020, we expect battery pack production capacity to reach 50 GWh and cell production capacity to be 35 GWh. At that level of production, we do not anticipate any commodity supply constraints.”

Tesla also noted today that California may be back in running for a Gigafactory location.

UPDATE from Conference call: CEO Elon musk was asked about the factory and partners. To which he replied that Tesla now has a signed LOI (letter or intent) with Panasonic, and they have created a joint development team. Nothing has been finalized, but the two companies hoped to have a final agreement in place later this year. As part of this deal only Panasonic would be partnered in the production of cells…unless they could not keep up.

Musk also noted that the biggest cost is in nickel – but the company is in talks with several nickel producers, including in Canada.

Mercedes-Benz B-Class Component Supply

“We have just commenced production of Tesla powertrains for the Mercedes B-Class vehicle, a significant milestone in the development of the program. We expect to ramp up production shortly and see continued growth during the year.”

As for future earnings guidance and expenses, Tesla expects Q2 operating expenses to grow sequentially by about 30% for R&D and 15% for SG&A.

“Despite the start of leasing vehicles, investments in R&D and geographic expansion, we expect to be marginally profitable in Q2 on a non GAAP basis.”

How did the market react to this report?

Not so well in the early going; after dropping almost $6.00 during the regular day’s session to close at $201.35, the after-hours trade fell a further $16 (8%) to around $185 at time of press. (A real time quote can be foundhere)

In this case they are both, and so is the potential partner. I think it’s the states that are begging more than the potential partners. They are weighing the risks of partnering vs the possible risks of not partnering.

That is huge! If I understand it correctly, the majority of the difference is due to the “leaseing” accounting model applied to the traditional purchase model. If that is the case, then the amount of “leasing” is a huge factor in the recent Tesla sales…

I don’t think it is not a huge factor. I’m not an accountant, but I believe the sum is as follows:
The difference between GAAP and non-GAAP profit is 67 million, or the revenue of about 700 Model S sales that can not be booked for the quarter. 10%

Sure there is. However, it’s offloaded to financing arms, like GM Financial. GM’s automotive division records a full sale, while the financial division handles leases.

In the end, it doesn’t matter for these financial arms of established automakers, because lease payments and off-lease sales make up for deferred revenue. GAAP and non-GAAP will align for Tesla after sales stabilize for a few years, which is quite some time from now.

Although, readers in the first 15 minutes or so have to suffer as the piece is put out in real-time and have to put up with my unedited/unpolished work…with no fancy pics, links and whatnot out of the gate.

Still, figure that is better (even if marginally, lol) than waiting a half an hour for the final product to be fully formed, (=

In order to be able to look at things in a sober manner, here are a few comparisons: Volkswagen posted 9.1 billion Euro in profits in 2013. So if the trend continues, VW will likely report about 2.275 billion Euro in profits in Q1 2014. So about $3.166 billion in a quarter. This is after taxes and interest.

Toyota, on the other hand, 1.52 trillion yen in profits for the nine months that ended on December 31. So about $15 billion, roughly $5 billion a quarter.

Tesla… 17 million in profits in a quarter. And now one could go into the topic of the stock market… Unfortunately, all this is not being done at InsideEVs.

Remember when a manufacturing company believed in investing in the future opposed to worrying about the next quarter report for investors? Those who are invested in Tesla for the short are wasting their time. Comparing Tesla to Toyota and VW’s startup would be more comparable.

Perspective?
A start up in their second full year of production projecting a 40% increase while:

If you want to try to compare to an established automaker, which is largely pointless for the reasons noted in the above replies, you’ll have to look at Porsche or Lambo, etc.: companies who’s entire lineup is in the luxury class and up. Even then, those automakers are established with many decades of development and brand recognition in an established technology (ICE). Tesla is a whole new ballgame. Their quarterly profits and EPS are always going to disappoint as long as their demand and their capabilities require continued rapid expansion. Expansion costs money. Development of new models cost money. GAAP will most likely tend toward the red ink for a long time, and that is perfectly acceptable at this phase.

Yes indeed. That info wasn’t in theoriginal earnings report. We will do a separate follow-up on the conference call that is ongoing now as well, (=

We have added the pending Panasonic deal info (below)into this piece now though.
—–UPDATE from Conference call: CEO Elon musk was asked about the factory and partners. To which he replied that Tesla now has a signed LOI (letter or intent) with Panasonic, and they have created a joint development team. Nothing has been finalized, but the two companies hoped to have a final agreement in place later this year. Musk also noted that the biggest cost is in nickel – but the company is in talks with several nickel producers, including in Canada.

Yeah – good work, and it’s a bit of a relief, too. These things take time, I know, and it’s no small feat they are agreeing to, but you’d think that they would already have had a good idea of which supplier was on board even before they make the formal announcement and raise the cash.

Musk also noted that the biggest cost is in nickel”
——
Boy if I had a nickel every time I’ve… Oh wait.
I have a bunch of useless Canadian nickels he can have.
This must be due to volume, not price/weight.

Its not about competition, when you’re talking about sourcing 35GWh of battery cells per year, I think it just makes sense to not single source it, but have two vendors if their products are good enough.

I’d probably split it up such that Panasonic cells go in the cars first, and then Samsung, and Samsung’s cells go into the grid storage first.

I figured as much about the Model X. They have not unveiled an alpha nor a beta yet, and the crash testing and extreme driving conditions testing are all done with the beta version. For a few months now, it has become increasingly obvious that there will be no 2014 deliveries of a production Model X.

Spring 2015 will start to look optimistic if Elon doesn’t start parading an alpha around by the 4th of July.

Having a drivable prototype is not what I’m talking about. Tesla’s “alpha” vehicle is one major step beyond prototype for early testing and working out significant details. The “beta” vehicle is the production-intent version that goes through the crash testing and performance testing, etc. By the time the Beta comes around, design and structural items, etc., are set and ready for production. It’s mostly tweaking the control systems, working on option packages, and finishing the interior details.

Sales numbers should not be judged on a month-by-month basis, as the transport to Europe is likely not a steady stream, but more per boat load. So some months will be better than others not because demand varies wildly.

Heard my first two disappointments with Tesla in this report. 1) No model X by the end of this year. 2) Retooling expectation of 40K production to 35K deliveries for 2014. Might just be a semantic difference, but it sounds like a downgrade. The market is probably reacting to this “delay” and “expectation readjustment”.

Nope, its wicked close. The monthly sales chart does not include international sales.

Thankfully, European sales can mostly be tracked via registrations (give or take a week’s play on the reporting vs actual sale date to close out the year – which was small given January’s volume), so we can reverse math sales domestically.

Just over 3,000 where registered in Europe, less the units sold right at year end that were counted as 2014.

6,457 total – 3,000 in Europe/ = 3,450 for the NA, we had NA sales for the quarter pegged at 3,800. So max we were out for the 3 months was 350 units (117/month)…that’s pretty darn close. (We do like to be perfect, so Q1 will be adjusted by 300 units)

Not sure if anyone will catch my comment this late in the discussion, but why not add it anyway.

Tesla and TSLA are two widely different stories. The market is pegging their valuation on them becoming AAPL overnight. So every quarter that fails to produce wild profits tends to disappoint them. Any quarter that shows major growth in production, wows the market. They take the production numbers and plug them into their formulas that generate wild profits in the next 1 – 2 years.

There is a major failure in this logic. Tesla has clearly stated, and demonstrated in their actions, that all cash generated form Model S (and Model X) sales will be used to grow the business. If TSLA posts a profit in the next 3 – 4 years, then they are wasting their money. They need to use every ounce of capital to turn themselves into a major 21st century automaker, not just stock pile cash and skip directly to dividends.

It is clear they have a winning vehicle platform that the rest of the industry cannot compete with. The mission from this point forward is the leverage that vehicle platform across as many segments and price ranges as reasonably possible.

Musk has already eluded to this mission in the vehicles they have hinted at: Model S, Model X, Gen III sedan, Gen III CUV, Truck and Roadster II (2+2 911 fighter w/ lower price), and one mention of Gen IV (Corolla fighter). If they can build the business and lower the production costs to build out that lineup of vehicles, then they will be an AAPL with the ability to print money for the market.

I think we will be waiting 10 – 15 years as they plod along that track. But if they can continue to keep their rapid pace of technology development, I see no reason why this won’t happen. I think this is all contingent on Musk leaving, becoming dedicated to SpaceX, or just burning out in general and turning into a recluse.

So maybe this should have been an article, instead of a comment ;). If anyone reads, enjoy.